Canadian investment manager InstarAGF has closed its inaugural infrastructure fund at C$740 million ($561 million; €495 million).
The Toronto-based firm’s debut vehicle, the InstarAGF Essential Infrastructure Fund, closed with commitments from investors in Canada, Europe, the UK and the US, but fell C$10 million short of its C$750 million target. InstarAGF chief executive Gregory Smith told Infrastructure Investor the firm closed the fund slightly below target because investors were writing cheques in the $50 million to $75 million range, and this was a “natural cutoff point”.
The fund is targeting energy, utilities and civil and social infrastructure assets. InstarAGF said it seeks investments with downside protection: assets that have long-term contracts, benefit from concession agreements or fall under regulatory regimes.
“In the course of our fundraising, what we found is an increased appetite from institutional investors in Europe and North America for the middle market,” Smith said. “A lot of institutional investors have invested in large mega-funds with a global mandate and are now looking at niche strategies to augment and round out their portfolio construction in the infrastructure class.”
The fund has made three investments so far, deploying 30 percent of its capital in infrastructure projects in Canada. The firm used the fund to acquire an interest in a passenger terminal at Billy Bishop Toronto City Airport for C$105 million in 2015. It also invested C$78 million for a 30MW wind project and purchased a 20.6 percent interest in a Canadian midstream energy services company C$75 million last year.
Smith said InstarAGF has a pipeline of upcoming deals and expects to deploy the fund over the next two years. The vehicle held a first close in March 2016 at C$372 million and a second close at C$522 million in November.
InstarAGF was launched in 2014 as a joint venture with Instar Group and AGF Management, one of Canada’s largest independent investment management firms.